Speaker 1:        Welcome to the Guerdon Associates podcast. We will examine recent findings on non-executive director tenure, independence, and board composition across ASX listed companies. We will review the latest updates to corporate governance principles, proxy advisor, voting guidelines, and committee expectations. Finally, we will outline the reported changes in director remuneration and shareholding requirements.

Speaker 2:        Right. So, we have several areas of analysis to cover regarding these governance and remuneration metrics for you today. If you are reviewing your own board structures, well, these findings provide a current view of the market.

Speaker 1:        Yeah. And according to the articles published by Guerdon Associates in October 2024, the tenure of non-executive directors is routinely evaluated in relation to their independence classification. So, we will examine the metric across 108 companies in the ASX 300.

Speaker 2:        Yes. And within that group of 108 companies in the ASX 300, there were 148 director resignations recorded during the analysed financial year. The research identifies the tenure limits set by various regulatory entities which factor into how independence is classified across different boards.

Speaker 1:        Right. If you are calculating the tenure of your board members, different proxy advisors and regulatory bodies apply different thresholds. Let us review the specific tenure limits recommended by those entities. So, the ASX Corporate Governance Council sets this recommendation at 10 years.

Speaker 2:        Yeah. And then institutional shareholder services set the limit at 12 years.

Speaker 1:        Right. And CGI Glass Lewis also aligns with that 12-year mark.

Speaker 2:        Exactly. Furthermore, Ownership Matters establishes a limit at 20 years. ACSI utilises a 10-year limit for its evaluations, and the Australian Institute of Company Directors provides a recommended timeframe ranging from 9 to 12 years.

Speaker 1:        Okay. So, when reviewing the sample of 148 director resignations within the ASX 300, what were the recorded tenure lengths for those retiring members?

Speaker 2:        Well, the shortest tenure recorded in the group was 0.2 years.

Speaker 1:        Okay.

Speaker 2:        And the longest tenure was recorded at 26.8 years. For the overall group of retiring non-executive directors, the median tenure was recorded at 8.2 years.

Speaker 1:        Right. So, we can break down those tenure averages by analysing the companies according to their market capitalisation quartiles. If we start with the lower percentiles, what does the breakdown show for those specific cohorts?

Speaker 2:        For companies with a market capitalisation under $1.3 billion, which represents the 25th percentile of the group, the average tenure was 7.7 years. When moving to companies between $1.3 billion and $2.4 billion, representing the 25th to 50th percentile, the average tenure was recorded at 6.5 years.

Speaker 1:        Moving to the upper percentiles, how were the tenure averages recorded for the larger companies?

Speaker 2:        So, for companies between $2.4 billion and $7.8 billion, the average tenure was recorded at 9.6 years.

Speaker 1:        Right.

Speaker 2:        Finally, for companies with a market capitalisation above $7.8 billion, the average tenure was recorded at 8.5 years.

Speaker 1:        Considering these figures, does a strict nine-year cutoff universally apply given the potential loss of corporate memory and the necessity for a mix of tenures on a board?

Speaker 2:        The analysis notes that a majority of directors resign before their board tenure reaches nine years. However, maintaining a mix of less tenured directors alongside longer serving directors carries corporate history. Turnover results in a loss of experience, which may be weighed against the strict application of independence classifications based on tenure length.

Speaker 1:        To summarise this segment, the review of 108 ASX 300 companies recorded a median tenure of 8.2 years for retiring non-executive directors. The average tenure varied across market capitalisation quartiles while regulatory limits range from 9 to 20 years. Key takeaway for the board director. Board directors should monitor tenure averages relative to company market capitalisation to manage independence classifications.

Speaker 2:        Yeah, and we will continue our discussion by looking as the broader structural rules.

Speaker 1:        Moving on to our next topic regarding governance frameworks, we will examine the ASX Corporate Governance Council principles.

Speaker 2:        Right. And according to the research published by Guerdon Associates in March 2025, the ASX Corporate Governance Council halted the consultation process on the fifth edition of the principles and recommendations.

Speaker 1:        Yeah. This decision to halt the process occurred after the council received 109 submissions regarding the draught. A part of this consultation process involved proposed disclosures regarding specific director characteristics, which were ultimately rejected.

Speaker 2:        The rejected proposals would’ve directed boards to disclose personal characteristics of their members, and the specific characteristics listed in the proposal included sexuality, age, indigenous heritage, and disabilities.

Speaker 1:        Okay. So, following the halt of that fifth edition consultation, an alternative proposal was introduced. Tenora Capital proposed a six-page set of principles to guide board structures.

Speaker 2:        Yes. That six-page proposal from Tenora Capital included two specific changes for boards. The proposal included annual director elections and introduced term limits of 9 to 10 years.

Speaker 1:        The research also reported on the outcomes of 812 director election resolutions that took place during the annual general meeting season.

Speaker 2:        Within those 812 director election resolutions, the results were tracked based on board endorsement. Out of the total resolutions, five non-board endorsed nominees did not receive the 50% support required for reappointment.

Speaker 1:        Right. So, if you look at the proposal for annual director elections, you might consider the mechanics of implementation. Might annual elections encourage short-termism and discourage risk-taking rather than building trust?

Speaker 2:        Well, the analysis states that annual elections would permit the regular removal of directors.

Speaker 1:        Okay.

Speaker 2:        However, arguments exist that this election cycle could discourage risk-taking and encourage short-termism among board members.

Speaker 1:        To summarise this segment, the ASX Corporate Governance Council halted its fifth edition consultation after receiving 109 submissions rejecting personal characteristic disclosures. At the same time, alternative proposals advocating for annual elections have entered the discussion.

Speaker 2:        We will now review how these boards are currently constructed.

Speaker 1:        Shifting gears to broader board composite and metrics, we review the Ownership Matters FY24 study on ASX board composition. If you evaluate board structures, these metrics detail the current demographics across the market.

Speaker 2:        According to Guerdon Associates articles published in October 2025, average board sizes vary by the specific index. So, the ASX 100 recorded an average board size of 8.8 members. The ASX 200 recorded 7.0 members, and the ASX 300 recorded 6.2 members.

Speaker 1:        Beyond the total number of members, the percentages of independent non-executive directors are also detailed for each index.

Speaker 2:        Yeah.

Speaker 1:        In the ASX 100, 94.9% of non-executive directors were independent. In the ASX 200, the percentage is recorded at 82.8%. In the ASX 300, it is 77.2%.

Speaker 2:        The study also breaks down gender diversity figures across these indices. Female directors hold 39.8% of board seats in the ASX 100. Moving to the broader index, female directors hold 35.1% of board seats in the ASX 300.

Speaker 1:        Additionally, the analysis notes specific leadership roles held by women. There were 41 female chairs and 22 female CEOs across the ASX 300. We can also review the age profiles recorded in the study.

Speaker 2:        For the age profiles, male non-executive directors in the ASX 100 average over 65 years of age. This average is 6.3 years older than the average age of CEOs. In contrast, female non-executive directors average 4.3 years younger than that demographic.

Speaker 1:        The study also covers director shareholdings. The findings indicate that 60.0% of ASX 100 non-executive directors hold shares in the company exceeding one year’s fees.

Speaker 2:        Yes.

Speaker 1:        The median value of these shareholdings is $352,929. We discuss the discrepancy in board independence percentages between larger and smaller companies. Does the leading reason in the ASX 300 holding options in the company drive this difference?

Speaker 2:        The study details the reasons for differing independence classifications. In the ASX 300, the category defined as other or options is the leading reason. The findings report that 37 of 54 affiliated non-executive directors in this category hold options in the company.

Speaker 1:        Okay.

Speaker 2:        In larger boards, the total shareholding amount is the primary factor affecting the independence classification.

Speaker 1:        To summarise this segment, the ownership matter study details differences in board size, independence percentages, and demographics across the ASX indices along with shareholding metrics for non-executive directors. Key takeaway for the board director. Board directors should evaluate their individual shareholdings and board independence levels against their specific ASX index cohort.

Speaker 2:        We will continue by examining the policies guiding these structures.

Speaker 1:        Turning our attention to institutional investor expectations, we examine the 12th edition of the ACSI governance guidelines.

Speaker 2:        According to the research published by Guerdon Associates in February 2026, the updated ACSI governance guidelines contain several modifications, including removed elements and newly introduced sections.

Speaker 1:        Right. Let us review the removed elements first. The guidelines no longer include the recommendation for the CEO pay ratio disclosure against the workforce. The expectation for a binding vote on pay policy every three years was also removed from the guidelines.

Speaker 2:        The new sections outline expectations regarding artificial intelligence. The guidelines detail expectations for boards to establish governance structures associated with digitalisation.

Speaker 1:        They also state expectations to establish policies to manage cybersecurity threats.

Speaker 2:        Right.

Speaker 1:        So, if you are reviewing your company’s risk register, these specific structural expectations apply.

Speaker 2:        Additionally, boards are expected to consider policies and principles for workforce dislocation driven by AI.

Speaker 1:        Okay.

Speaker 2:        This involves taking a long-term view of the risks and opportunities associated with technology integration.

Speaker 1:        The guidelines also detail expectations for dedicated CEO succession planning.

Speaker 2:        Yeah.

Speaker 1:        Furthermore, there is an expectation for the appointment of a lead independent director when a chair is linked to a controlling shareholder or founder. Considering the new sections on technology, how might boards implement guardrails and data governance for AI while simultaneously managing the long-term risks of potential workforce dislocation?

Speaker 2:        Well, the guidelines state boards are expected to establish policies and processes that guide AI use. This includes reflecting the sensitivity of the information collected by the company while simultaneously considering policies to manage the workforce dislocation that AI deployment may cause.

Speaker 1:        To summarise this segment, the 12th edition of the ACSI governance guidelines removed specific remuneration disclosures and introduced new board expectations regarding artificial intelligence governance, CEO succession, and lead independent directors. Key takeaway for the board director. Board directors must ensure appropriate governance structures are established to manage artificial intelligence deployment and cybersecurity threats.

Speaker 2:        Next, we review the financial metrics associated with these roles.

Speaker 1:        Transitioning from governance policies to director compensation, we look at the analysis of non-executive director policy fee changes from FY 2024 to FY 2025 and the ASX 100.

Speaker 2:        According to Guerdon Associates articles published in April 2026, the analysis indicates that 45% of companies increased board fees during this period.

Speaker 1:        The median policy board fee increases were recorded at 4.00%, equating to $21,067 for chairs. For other directors, the median increase was 4.08%, which equates to $8,000. Let us break down the changes by market capitalisation.

Speaker 2:        So, chairs of companies with a market capitalisation greater than $29 billion recorded a 5.79% average increase in remuneration.

Speaker 1:        We can also review the changes by analysing the GICS sector classifications. The information technology sector recorded the median chair increase at 4.40%.

Speaker 2:        And the healthcare sector recorded a 17.59% average increase.

Speaker 1:        Okay.

Speaker 2:        This percentage change was attributed to a board restructure in one company within that sector.

Speaker 1:        Right. The overall fee pool details indicate a median year-on-year increase of 25.00%. You noted the percentages for the broader board. Does the higher percentage increases for committee members compared to committee chairs reflect a redistribution of workload expectations across the board?

Speaker 2:        The findings indicate that committee members generally experienced higher average percentage increases than their respective chairs. Furthermore, remuneration committee members recorded the highest growth at the upper quartile of the analysed group.

Speaker 1:        To summarise this segment, the FY 2024 to FY 2025 analysis of the ASX 100 shows that 45% of companies increased board fees with median increases of 4.00% for chairs and 4.08% for other directors alongside specific changes across sectors and fee pools. Key takeaway for the board director. Board directors should review their company’s fee pools and committee remuneration against the reported median increases in their specific market capitalisation group.

Speaker 2:        We will conclude our analysis with updates on shareholder voting.

Speaker 1:        Moving to our final area of focus regarding shareholder voting, we review the updated 2026 proxy voting policies for State Street Global Advisors and Vanguard.

Speaker 2:        According to the research published by Guerdon Associates in May 2026, these two entities are estimated to own 10% to 15% of Australia is listed stocks.

Speaker 1:        Right. State Street updated its evaluation criteria for financial performance. They now evaluate financial performance by comparing total shareholder return relative to GICS sector peers.

Speaker 2:        Yes. State Street has also shifted away from naming DEI categories. They moved away from applying specific diversity targets for US companies in their guidelines.

Speaker 1:        Vanguard’s policy development regarding board effectiveness outlines a different area of focus. Vanguard states that independent board leadership is within the purview of the board. They generally recommend a vote against proposals to separate the CEO and chair roles. Looking at the State Street criteria, does evaluating performance strictly by total shareholder return relative to GICS sector peers fully capture a company’s long-term strategic execution?

Speaker 2:        Well, the policy update explicitly states that financial performance may be considered by comparing total shareholder return relative to GICS sector peers. This evaluates the performance against comparative market returns within that specific industry classification.

Speaker 1:        To summarise this segment, State Street and Vanguard updated their 2026 voting policies with State Street focusing on total shareholder return relative to GICS sector peers and moving away from specific diversity targets for US companies while Vanguard affirmed board discretion over independent leadership structures. Key takeaway for the board director. Board directors should assess executive performance by comparing total shareholder return against GICS sector peers to align with major passive index fund expectations.

Speaker 2:        As the regulatory landscape shifts away from prescriptive diversity disclosures toward principles-based governance, how will the underlying definition of a trusted board evolve in the eyes of retail versus institutional investors over the next decade?

Speaker 1:        Thank you for joining the conversation.

Speaker 2:        Thank you for listening.